Here’s What’s Dragging JC Penney Company Inc (JCP) Down

Shares of JC Penney Company Inc (NYSE:JCP) are trading off 17% on the heels of disappointing second-quarter earnings. Specifically, the struggling department store chain reported a net loss of $0.09 per share, compared with consensus estimates called for a net loss of $0.05 per share. In addition, same-store sales fell 1.3%, worse than Street expectations for a 1.2% drop. To the company’s credit, net sales in the second quarter climbed 1.5 percent, to $2.96 billion, slightly above forecasts.

CEO Marvin R. Ellison commented, “We are pleased to deliver a top line sales increase of 1.5 % and quarterly sequential improvement of 220 basis points in our comp sales performance in go forward stores. While broader retail remains challenged, we are encouraged by the improved performance in our total apparel business, including a significant acceleration in kids` apparel. Nearly all categories delivered improved sales results during the quarter, with our growth initiatives in beauty, home refresh and omnichannel continuing to deliver positive sales growth.”

“During the second quarter, we liquidated inventory in 127 of our closing stores which had a negative impact on gross margin and EPS. These events were isolated to the second quarter. As such, we are reaffirming our EPS guidance for the year, and remain confident in our ability to further strengthen our balance sheet, while driving sustainable growth and long-term profitability for JCPenney. To that end, we are pleased that we are off to a strong start in August for the all-important back to school season. We are excited by this momentum and expect to deliver improved results in the back half of the year,” Ellison continued.

On the ratings front, JCP has been the subject of a number of recent research reports. In a report issued on August 8, Deutsche Bank analyst Paul Trussell maintained a Hold rating on JCP, with a price target of $6.50, which implies an upside of 67% from current levels. Separately, on the same day, Credit Suisse’s Christian Buss downgraded the stock to Sell and has a price target of $5.00.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Paul Trussell and Christian Buss have a yearly average return of2.1% and 3.6% respectively. Trussell has a success rate of 58% and is ranked #1676 out of 4628 analysts, while Buss has a success rate of 61% and is ranked #1484.

Overall, one research analyst has rated the stock with a Sell rating, 9 research analysts have assigned a Hold rating and one research analyst has given a a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $6.00 which is 54% above where the stock opened today.

J. C. Penney Co., Inc. operates department stores, which consist of selling merchandise and services to consumers through its department stores. It sells family apparel and footwear, accessories, fine and fashion jewelry, beauty products through Sephora inside JCPenney and home furnishings.